The (8;21) translocation between AML1 and ETO is a frequently- observed nonrandom genetic alteration associated with acute myeloid leukemia (AML). AML1 upregulates a number of target genes critical to normal hematopoiesis, whereas the AML1-ETO fusion interferes with this function. We discovered that the fusion partner ETO binds to the human nuclear receptor co-repressor (N-CoR). Human N-CoR, which we cloned and sequenced in its entirety, encodes a 2,440 amino-acid polypeptide and has a bipartite central domain that binds ETO. N-CoR, Sin3, and histone deacetylase form a complex that alters chromatin structure and mediates transcriptional repression by nuclear receptors and by a number of onco-regulatory proteins. We determined that ETO, either alone or as part of the AML1-ETO fusion, could bind to the N-CoR complex. As a result of this interaction, ETO can function as a potent repressor of transcription. Our observations provide a novel mechanism for how the AML1-ETO fusion inhibits expression of AML1-responsive target genes and disturbs normal hematopoiesis. Based upon this new information, we are now testing the hypothesis that inhibitors of histone deacetylase may serve as a specific means of "de-repressing" hematopoietic target genes in patients with t(8;21) AML.